How to keep mega-corporations from destroying democracy

Four years ago, as 3D printing was picking up steam, proponents described a future dominated by small “makers” distributed around the country. These entrepreneurs, either at home or in local workshops, would replace much of the corporate economy and offer buyers more localized, even customized products. But now that 3D printing has become a commercial reality, it’s clear that the vision was only half right.

3D printing, or more generally additive manufacturing, is poised to replace the giant factories of today with decentralized production close to customers. But controlling these factories will be diversified manufacturing giants. Because additive manufacturing is far more flexible than its conventional counterpart, companies can have the same plant supply multiple industries — and quickly adjust production lines according to trends in demand. Thanks to these cross-industry synergies in operations, we’re likely to see the formation of “pan-industrial” corporations, each focused on a major additive material or process.

To organize the diverse operations, pan-industrials will rely on sophisticated software platforms to coordinate and optimize decisions on when, where, and what to make. They can do this because additive is a highly digital process. And once a pan-industrial perfects this platform, it will invite its suppliers and distributors to join — which will further improve the coordination and optimization. Over time, the pan-industrial will invite in every firm that wants to join its ecosystem — and it will reap the same benefits that Apple and Facebook get from their popular platforms. It’s a recipe for a great leap forward in efficiency — but the political consequences of these agglomerations may be equally important.

In the wake of the controversial 2010 Supreme Court ruling in Citizens United v. Federal Election Commission, which effectively eliminated the limits on political spending by for-profit corporations (as well as other kinds of organizations), many Americans are worried about the political power wielded by big companies and their owners and executives. Business owners with strong political views, like the liberal George Soros and the conservative brothers David and Charles Koch, have invested hundreds of millions of dollars to promote the views and the candidacies of politicians they favor. Wealth is now being used to wield direct political influence to a degree that the founders of the nation surely never imagined or intended.

Spending cash to try to sway elections through advertising campaigns and other support to candidates is as American as baseball. And it is only one of the ways that well-heeled business leaders try to influence government. Another is lobbying efforts aimed at “educating” legislative leaders and government regulators concerning the kinds of rules favored by business. Such efforts can have a huge impact on the decisions made by Congress as well as state and local governments — especially when accompanied by campaign donations that include thinly veiled quid pro quo.

More indirectly, a growing number of allegedly nonpartisan not-for-profit organizations, including think tanks, rely heavily on corporate funding. This can be viewed as evidence of socially minded generosity on the part of business donors — but it also gives the companies significant influence over the agendas of the researchers, writers, and policy advocates supported by those gifts, even in the absence of overt bribery or coercion.

In a few cases, such as the 2017 firing of researcher Barry Lynn by the think tank New America after Lynn published a statement sharply critical of Google — a major funder of the organization — the connection

between corporate funding and political influence seems obvious. In other cases, the resulting influence may be subtler, but the cumulative effect is likely to be significant.

But if you fear that big businesses have too much sway over politics in America today, you ain’t seen nothing yet.

In the age of the pan-industrial, the national and possibly global power of the biggest corporate agglomerations will be gigantic. In part, this will be an artifact of sheer size. A pan-industrial that controls hundreds of billions or even trillions of dollars in revenues will be able to pour sums of money into election campaigning, lobbying efforts, think-tank sponsorships, and other influencing projects at a rate that even today’s biggest tycoons can’t match.

The unparalleled reach of pan-industrials into many industries, markets, and communities will greatly augment their power while also expanding their interest in wielding it. I’ve already explained how the era of additive manufacturing is likely to lead to highly dispersed facilities for producing, distributing, and marketing goods of all kinds. The political implication is that, for example, the great auto companies of the future will no longer apply their political influence mainly in a handful of huge centralized manufacturing centers like Detroit. Instead, the General Motors or Toyota of tomorrow — perhaps as one component of a hypothetical titan like Universal Metals — may have a hundred production facilities scattered through every state of the union . . . and a team of lobbyists in every state capital, looking out for the company’s interests.

What’s more, since the pan-industrials will likely be active in a broad array of business sectors, when a particular issue affects them deeply enough, they will be able to exert influence on politicians through a multiplicity of channels. Thus, if antitrust regulators try to crack down on the anti-competitive behavior of a particular pan-industrial collective, the political action committee (PAC) linked to that collective may choose to support primary election challengers to any member of Congress who refuses to rein in the regulators. And the PAC will be able to fund those electoral challenges through donations from myriad businesses, from local retailers, manufacturers, and service providers to giant banks, airlines, high-tech firms, and more.

Throw in that each of the biggest pan-industrials will probably also control its own collection of media properties — cable TV and radio networks, print publications, online news sites, and the like — and it’s easy to imagine the incredible pressure they will bring to bear on any politician who dares to defy their wishes.

Thankfully, there will be many political issues on which the pan-industrial titans will take conflicting views — just as today’s conservative owners of companies in industries such as fossil fuels often butt heads against their more liberal counterparts from Silicon Valley. The lack of unanimity among the potential oligarchs will prevent them from acting in concert and make it more difficult for them to drive political decisions in directions that violate the broader public interest.

Still, the huge political influence that the pan-industrials will command is sure to raise challenging political and social issues with which business leaders, political leaders, and concerned citizens will need to grapple.

Designing a New Model of Capitalism

As the pan-industrial firms, federations, and collectives take over large portions of the economy, capitalism as we know it will change. Principles of open markets, antitrust, regulation, and the ownership of the means of production may change. Karl Marx may have been correct when he said that capitalism will bury itself. Capitalism itself may be threatened — and the politically powerful leaders of the pan-industrials may be tempted to take matters into their own hands, which could lead to a society that is a far cry from the one America’s founders envisioned.

The antitrust weapon. One of the biggest U.S. government powers that could be applied to reining in the pan-industrials is antitrust law. Enforcers of antitrust regulations will need to step in when the pan-industrials abuse their power. With recent data indicating a rising tide of concentration in many industries, some politicians, pundits, and policy experts on the left side of the political spectrum have already been calling for increased antitrust enforcement. The biggest giants in the technology industries — Alphabet, Apple, Amazon, Microsoft, and a handful of others — have been painted as potential targets. Some are saying that the time has come to consider using governmental power to force the breakup of some of the high-tech giants, much as was done to AT&T in the 1982 and to Standard Oil way back in 1911.

However, as the writer Matt Rosoff pointed out in an insightful opinion piece from April 2017, a thoughtful scrutiny of the state of competition in the high-tech world suggests that none of the rival giants actually maintains the kind of monopoly power over any given market that antitrust regulations were originally designed to combat. Instead, they are engaged in a continual state of war with one another over a fragmented set of interrelated businesses. Apple and Alphabet, for example, battle each other for leadership of the smartphone industry; Alphabet, Facebook, and Amazon battle for leadership of the online advertising world; and Microsoft, Amazon, and Alphabet vie for leadership in cloud computing. Meanwhile, a steady stream of startups continues to produce technological and business-model innovations, posing new challenges to today’s giants. In short, Rosoff concludes, antitrust law is a “blunt instrument” that should only be used in cases where true monopoly power exists and is stifling innovation — which is not the case in today’s high-tech universe.

The principle Rosoff articulates should also be applied to the coming world of the pan-industrials. It also seems unlikely that any one or two pan-industrial collectives will ever be able to seize control over a majority of the U.S. or world economy. Instead, the future is more likely to see a continual battle among a limited number of pan-industrial titans, each seeking to defend and, if possible, to expand its own sphere of influence.

Like today’s high-tech arena, the economy of tomorrow will be led by six to ten titans constantly jockeying for marginal advantages over one another, none of them ever really capable of achieving full-scale victory over their rivals. This world of constant border skirmishes among great powers will help rein in the tendency of any one pan-industrial to engage in the kind of predatory behavior that a true monopoly can indulge. If that changes, it will be time for government agencies to wield the club of antitrust law, using it to break up a domineering giant who is no longer adequately restrained by competitive pressures.

Forging a new social compact. It’s possible to imagine a dystopian future in which chieftains of the pan-industrials become, in effect, national, regional, or global oligarchs wielding unchallenged economic and political power.

However, history suggests that a different outcome is more likely. America has faced the problem of centralized wealth many times in the past, and preserved its democratic and capitalist system. Both the era of the robber barons and the Great Depression of the 1930s led to reforms. In the 1930s, decades of rising inequality had ended with a crash, leaving a quarter of the workforce unemployed. It was the culmination of the industrial revolution of electric power and the assembly line. But instead of socialism, the country got a New Deal that saved capitalism by adding an array of protections for ordinary people. Big companies accepted this structure and flourished, while the country enjoyed decades of widely shared prosperity. Wealthy families gradually lost their hold over the economy as high estate taxes and generational shifts diluted their wealth, drove governments to introduce legal and institutional reforms that limited business excesses, instituted protections for workers and consumers, and created regulatory bodies with the ability to constrain corporate growth.

In the decades ahead, a similar dynamic is likely to play out over the long run. The pan-industrials will have a lot to lose from social instability. Just as wealthy families and corporate executives grudgingly went along with the New Deal of the 1930s, the powerful owners and leaders of the pan-industrial empires will eventually accept a similar compromise between business and social interests — but only after a painful, protracted struggle in which many are likely to suffer.

To avoid being the subject of intense attack from government regulators and citizen activists, the managers and owners of pan-industrial firms, federations, and collectives will have to step up to the social responsibilities inherent in their vast economic and political power. In the Gilded Age, tycoons like Andrew Carnegie and John D. Rockefeller donated millions to social and charitable causes partly in reaction to the bad publicity attracted by ruthless businessmen like J. P. Morgan. In a similar way, peer pressure and evolving social mores may drive a revival of the notion of noblesse oblige in the era of the pan-industrials.

Richard D’Aveni is the author of THE PAN-INDUSTRIAL REVOLUTION: How New Manufacturing Titans will Transform the World, from which this article is adapted.